Emerging markets pick up after holiday; spreads tighter; Philippines, Indonesia deals eyed

By Christine Van Dusen

Atlanta, Jan. 4 - Emerging markets slowly began to wake up from a prolonged holiday-related slumber on Monday as investors - armed with cash - watched to see which new issues would come to market first in the New Year, sources said.

"Spreads are tighter across the board, and we continue to see customers who have got money to put to work," a London-based trader said. "Generally the market's in OK shape. But people are still just filtering back in after two weeks off."

The first new deal to come to market in 2010 could be the Republic of the Philippines with a planned dollar- or euro-denominated offering of up to $1.5 billion equivalent. That deal "could print as early as tomorrow," a New York-based market source said.

Another new issue crossed radar screens on Monday: An expected $4 billion issue of 10- and 30-year bonds from Indonesia via Barclays Capital, Citigroup and Credit Suisse. That deal could come to market sometime in January.

"This time of year is largely dominated by sovereigns - history has told us that this week and next are heavy supply weeks for them - so I expect we'll have a couple of things emerge in the middle of the week," the New York-based market source said. "I think it's going to be very active in January in general, with some pretty significant supply numbers coming out."

Helping to lead the way, he said, will be Latin America. "I think they'll drive the ship, at least initially."

This means the market might finally see the expected benchmark offering of dollar-denominated sovereign global bonds from the Dominican Republic via Barclays Capital and Citigroup.

Asia also is expected to get in on the act. Market sources are whispering about a possible $1 billion issue of dollar bonds this month from Vietnam.

"We might also see something coming out from Korea," the New York-based source said.

In the secondary on Monday, there "were more buyers than sellers around," another London-based source said. "There are buyers across the board, really, looking at Russia, Turkey and the Middle East."

These buyers are beginning to embrace more risk, the London trader said, "but it's a slow start to the proceedings. It's a mixed bag, really."

Overall, emerging markets are "in a very different state than we were a year ago," the New York-based source said. "Right now, everyone is basically reserving new cash for new issue supply."

Philippines' deal 'imminent'

The Republic of the Philippines plans to issue a dollar- or euro-denominated offering of bonds that could total as much as $1.5 billion equivalent, according to a market source.

"It could be imminent," the source said. "I'm hearing that the Philippines could print as early as tomorrow [Tuesday]."

Indonesia plans bonds

Indonesia (Ba2/BB-/) plans to issue up to $4 billion in bonds due 2020 and 2040, according to a market source.

The bookrunners for the deal, which is expected to come to market sometime this month, are Barclays Capital, Citigroup and Credit Suisse.

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